For the Love of Money: Free Currency in the 21st Century


For the love of money is a root of all kinds of evil.
-1 Timothy 6:10, New International Version

The Christian bible is basically right, though its message is nothing new; at least since Aristotle, man has questioned money’s contradictory functions as medium of exchange and as store of value. The former leads to smooth trade, the latter leads to greed, accumulation of extreme wealth and usury. The problem, then, is how to separate and mitigate money’s corrupting power.

As a medium of exchange, the power of money is restricted to measuring the value of and signifying the completed exchange of a good or service. In this pure exchange of goods and services the prices of goods would remain stable, just as a foot is always twelve inches, bread would always be one dollar.

As a store of value, however, money has the power to disrupt the pure exchange of goods and services. Instead of being employed in mutually beneficial transaction, it is hoarded for speculative or greedy purposes. Those who hoard money are able to charge interest in exchange for loaning their surplus, because they have created artificial scarcity. The creation of interest then demands the creation of more money (to pay off the manufactured interest) which drives up prices and paradoxically affects money’s ability to measure value and facilitate exchange.

In medieval Europe, the church fought the evil side of money by attempting to prohibit usury.

In modern Europe, governments institutionalized “legitimate” money hoarders and attempted to control lending on a macro-level to avoid outrageous debt and inflation. Central banks were expected to set appropriately low interest rates to ensure an acceptable rate of inflation and prevent debt traps. But banks have proven just as prone to over-lending and creation of debt bubbles as medieval loan sharks.

And even when banks are beneficent and set low interest rates, that only causes less money to be loaned anyway, as lenders end up speculating on higher returns in the future. Money then circulates more slowly and the result is economic stagnation and unemployment. Nowadays we simply accept this as the “business cycle”.

During the Great Depression, however– a period of drastic economic stagnation and unemployment caused by failed governmental monetary policy and exorbitant speculation– a town in Austria rejected the inevitability of the the “boom and bust.” The history of Wörgl, Austria and the theories of Silvio Gesell prove that the cycle of boom and bust that we believe is a necessary evil, is not.


In 1932, the mayor of Wörgl sowed an economic miracle in his small way-station town by employing the theory of Freiwirtschaft– Free Economy. German thinker Silvio Gesell proposed in 1915 that the slow circulation of money brought about by hoarding is the principal cause of a failing economy.

To counteract the inclination to hoard, Gesell proposed a carrying cost, known as demurrage, in order to “rust” money and cause it to lose value. For example, the Wörgl Bills depreciated at a rate of 1% per month, and to prevent the devaluation, the money holder had to affix a stamp to the bill by the end of the month, the value of which was the 1% of the bill’s value. No one wanted to have to pay the demurrage, and so spent the bills as quickly as possible.

The Wörgl Bill circulated so quickly that in three days 1000 Schillings accounted for the payment of 5,100 Schillings in outstanding taxes. One Swiss observer, engineer Claude Bourdet, observed that “never before one saw taxpayers not protesting at the top of their voices when parting with their money. In Wörgl no one was protesting. On the contrary taxes are paid in advance.”

The town was able to finance a slew of public works, including a reservoir, a ski jump, and a bridge. And prices did not increase since hoarding was impossible. Bourdet reported, “incidental price increases, the first sign of inflation, do not occur. As far as saving is concerned one can say that the new money favors saving properly so-called [sic] rather than hoarding money. As money lost value by keeping it at home, one could avoid the depreciation by depositing it in a savings bank.”

But the miracle was not to last. The Austrian Central Bank saw its legitimacy threatened and its monopoly on the money supply slipping and urged the Austrian government to criminalize the issuance of “emergency currency.” Wörgl, as a result, quickly slumped back into 30% unemployment on the eve of World War II. Free Economy and the “miracle of Wörgl faded into obscurity. And, ironically enough, during the Red Scare, in which the West was taught to dread a centrally planned economy, few questioned their own government’s planning of interest rates and money supply.


But now, seventy one years later, thirty miles from Wörgl in Bavaria, the theories of Silvio Gesell have resurged in a slightly altered form, as the Chiemgauer. Since its creation by a Waldorf School economics teacher in 2003, the Chiemgauer has experienced steady success, circulating 2.5 times faster than the Euro and doubling in quantity every year. It is the most successful local currency among a slew of local currencies promoted by the German Regiogeld (local currency) movement, and the most successful attempt at demurrage currency worldwide.

Nevertheless, the Chiemgauer is not fully Freigeld (Free Money) as Silvio Gesell envisioned. Its value is pegged in a one to one exchange rate to the Euro, and thus local Chiemgauer prices are still subject to the inflation caused by European monetary policy and financial speculation. It serves only to speed up monetary circulation, not eliminate the ability to hoard.

According to a spokesperson for Chiemgauer eV, the organization backing the currency, “The aim of a regional currency is to promote the local economy, which also benefits the environment because the carbon footprint of local logistics is clearly much lower.” Free Money is reinterpreted as an environmental and local stimulus program, rather than being seen as the price-stabilizing, growth-stimulating, full employment, anti-usury solution of the Wörgl model.

The Regiogeld movement allows for a hold on the decay of currency by storing in specialized savings accounts, but citizens can also switch to Euros (albeit at a cost of 5 cents per Euro) if they wish to start accumulating interest and hoarding wealth; continuing the destabilizing effects of an infinitely increasing money supply.

Of course, many argue that the endless growth of the money supply is beneficial for growth in general. Some see the multi-fold increases in wealth that the exchange of debt on Wall Street had for the uber-rich as a necessary step towards growth. The ends justify the means.

It is worth wondering how one might achieve growth without lending capital. But the evidence of Wörgl’s spectacular growth in the midst of economic depression and the sound theoretical foundations of Freiwirtschaft indicate that accumulating money in the hands of a few money changers is not necessary for progress. It may even be a detriment.

Many alternative currencies–Bitcoins (non-demurrage, no transaction costs, infinitely divisible), BerkShares (American take on demurrage), WIR Franc (asset-backed lending, inspired by Gesell), etc.–have arisen to challenge millennia old assumptions about the nature of money. But as of yet it remains as true as ever that so long as men can still “love” money, it will continue to be the root of all kinds of evil. The endless tumult of the market and the bonds of debt will not ease until money no longer functions as a store of value.

At the very least, Wörgl’s success during the Great Depression and Bavaria’s relative stability during the Great Recession attest to the crisis aversion power of Gesell’s theories. Irving Fisher, a Yale professor and America’s first celebrity economist, said of Silvio Gesell in 1933:

“Free money may turn out to be the best regulator of the velocity of circulation of money, which is the most confusing element in the stabilization of the price level. Applied correctly it could in fact haul us out of the crisis in a few weeks … I am a humble servant of the merchant Gesell.”

While I fully submit to the merchant Gesell, I also encourage a healthy skepticism. After all, Free Economy has never been tried outside of a single case over seventy years ago. Perhaps the kind of growth experienced in Wörgl is unsustainable–after all, one can only build so many ski jumps. Maybe the dual nature of money is a yin-yang situation, with the positive aspects of unfettered, stable, egalitarian exchange checked by the volatility of creditor- debtor power struggle and erratic monetary policy. But then again, maybe not.



Onken, Werner. “The Political Economy of Silvio Gesell: A Century of Activism.”American Journal of Economics and Sociology 59.4 (2000): 609-22. Print. v=1&t=hoiw3mte&s=6f25effe8511f8e73cf2dc84106c1a236130b185

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